Mortgage Loan Modifications: Definitions, Changes and Problems


You probably already know of the Mortgage Loan Modification Program. However, if this is something that affects you in any shape or form, you should find out exactly how it works, as well as the changes and problems that come with it.

Mortgage Loan Modification’s Key Definition: Negotiate.

Loan modification talk is everywhere. The idea that talking to any mortgage loan company during these hard times should result in a better deal is so pervasive that people are treating modifications like a constitutional right. Borrowers are calling their mortgage companies and demanding a lower interest rate, a lower payment and a lower principle, because the President said so. Unfortunately, a new deal is far from guaranteed. The federal government directed the mortgage industry to help reverse the effects of loose lending practices and falling home values and gave them a portion 700 billion dollars to do it. The average home owner needs to understand that a loan modification is a negotiation between the mortgage company and the owner. Nothing is guaranteed by the federal government or any other institution. Banks have vague guidelines under which a borrower must qualify in order to get the modification. Approaching this process from a negotiating standpoint is critical to achieving success.

Mortgage Companies have made Important Changes

Prior to fall of 2009, the modification process was rather straight forward. The borrower called his or her mortgage company and asked. The mortgage company then requested financial information, pay stubs, tax returns, hardship letters, and any other piece of paper they could add to the debris field. According to modification experts at the Shamaya Law Firm in Michigan, this was all to slow the process down and keep the borrower paying in and the fed’s money inside the bank’s vaults. The mortgage industry started to take a lot of heat when lawyers started getting involved and these slow down tactics were revealed. Lawyers provided this service for fees ranging between $2500 and $3500 with the promise that the modification would be done in 120 days or less. According to Shamaya LLC, the industry has now gone to “trial” modifications or “temporary forbearance” agreements which stretch the process out for about 90 days. After completing this trial period of three payments, which may be higher or lower than the regular payment depending on the financial institution, then a “permanent” modification process begins. Many borrowers are now seeing results in 120 days, and thus the legal services market for modifications is drying up.

Helpful Hints

The main thing is to be honest. Don’t falsify or skew information to try to gain an advantage. You need to be solvent. Painting too bleak a picture can actually get you denied for your modification. The mortgage company will feel that even with a lower payment, you can’t afford your house and go ahead and foreclose. You should try to keep yourself between $100 and $200 to the positive side on your monthly balance sheet. Finally, document every phone conversation with name, ID number, date, time, and content. You need to save every fax confirmation sheet and every document you send, no matter how many times you send the same document. A helpful tip is to go to a local bank branch of your mortgage company. It is difficult for the mortgage company to say they didn’t receive a fax from themselves. Also, many branches will do this for free.

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